Faith in credit fading during crunch - Los Angeles Times

Faith in credit fading during crunch - Los Angeles Times: "Even if the current trouble had taken a more traditional form, however, there is still a problem with credit crises that make them particularly difficult to deal with: Unlike the cash in your pocket, credit is in more than one place at a time. The act of giving or accepting it is almost entirely an act of faith. The quality is illustrated in a famous line from Frank Capra's 'It's a Wonderful Life' in which banker George Bailey (played by Jimmy Stewart) confronts an angry customer demanding his money, saying it is in Bailey's bank. 'Your money's not in the bank,' Bailey replies. 'It's in Mr. Smith's house.' 'There isn't enough money in the world to finance every transaction that occurs in a day, so you have to have faith or confidence you'll be paid when you're told you'll be paid,' said author and financial markets expert Peter L. Bernstein. That is precisely the faith that a growing number of people do not seem to have in the type of credit at the center of the current trouble: securities backed by mortgages, especially those backed by sub-prime mortgages (lent to people with less than strong credit histories). Hundreds of people crowded offices of Calabasas-based Countrywide Financial Corp., the biggest U.S. mortgage company, in Laguna Niguel, Pasadena"